China Factory Data Suggest Recovery "Still in First Gear"

Via The Wall Street Journal

By Liu Li

BEIJING -- Manufacturing activity in China declined in March for the eighth consecutive month as prices and new orders continued to weaken, according to the CLSA China Purchasing Managers Index issued Wednesday.

The index, a gauge of nationwide manufacturing activity, fell to 44.8 in March from 45.1 in February, CLSA Asia-Pacific Markets said.

The data, the first broad economic indicator published for March, likely mean that the world's third-largest economy hasn't yet managed to reverse its sharp downturn in growth. Government statistics for March are due to be issued in coming weeks, but data for the first two months of the year show some encouraging increases in bank lending and investment.

"Although China's proactive monetary and fiscal policies are yielding positive results, the country's economic recovery is still in first gear," said Jing Ulrich, chairman of China equities with J.P. Morgan Chase.

A PMI reading below 50 indicates that manufacturing activity is contracting compared with the previous month. March was the eighth month below that level, but it followed three months when the index had risen, a trend that had raised hopes that the rate of decline in manufacturing was starting to bottom out.

"A worsening of domestic manufacturing orders lies behind the drop in the PMI and accords with what we are seeing on the ground in the steel industry," said Eric Fishwick, CLSA's head of economic research. He said he expects further weakness in production in April.

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